MNI POLICY: BOJ Loan Survey Result At Odds To Fed, ECB Surveys

By Hiroshi Inoue

     TOKYO (MNI) - Bank of Japan officials are encouraged by favourable results

from its own loan survey, particularly  in comparison with less favourable loan

surveys by both the U.S. Federal Reserve and the European Central Bank, MNI

understands.

     The latest BOJ survey showed that commercial banks have eased credit

standards for loans to firms, which implies they eased considerably or eased

somewhat.

     The diffusion index for credit standards by banks to large firms over the

next three months stood at +10, up from +2 in January. The DI to smaller firms

stood at +26 in April, up from +3 in January.

     BOJ analysis showed that the existence of governmental financial entities

supporting corporate financing is behind Japanese banks' active stance on loans.

     Despite concern over credit risks, those banks appeared to accept

responsibility emerging from public opinion to facilitate corporate financing.

     Meanwhile, the similar surveys by the Fed and the ECB showed that

commercial banks tightened their credit standards for loans to firms.

     Commercial banks in the U.S. and Europe are more sensitive to credit risks

and non-performing loans, which will impair their businesses and continuance.

     The Fed's senior loan office opinion survey on bank lending practices

released May 4 said, "Regarding loans to businesses, respondents to the April

survey indicated that, on balance, they tightened their standards and terms

significantly on commercial and industrial (C&I) loans to firms of all sizes."

     It also said, "Banks reported stronger demand for C&I loans from large and

middle-market firms, while demand for C&I loans from small firms was about

unchanged."

     Net percent of domestic respondents tightening standards for commercial and

industrial loans rose to near 40 from zero.

     The ECB's bank lending survey released April 28 said, "The net percentage

of banks reporting a tightening of credit standards for loans or credit lines to

firms was small compared with the financial and sovereign debt crises." But

credit standards for loans to enterprises tightened in the first quarter of 2020

(a net percentage at 4%, after 1% in the fourth quarter of 2019).

     The ECB's survey said, "Banks indicated that they were not yet able to

fully evaluate the effects of the coronavirus pandemic." "Banks referred mainly

to the deterioration of the general economic outlook and firms' increased credit

risk as relevant factors for the tightening of their credit standards."

     Net percentages of perception of risk rose to +19 in the first quarter of

2020 from +6 in the fourth quarter of 2019.

     The weighted difference ("diffusion index") between the percentage of banks

reporting that credit standards have been tightened and the percentage of banks

reporting that they have been eased."

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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